House of Representatives

Supplementary Explanatory Memorandum

Amendments to be moved on behalf of the Government (Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 6 - Indirect tax transition

Detailed explanation of the new law

6.1 This Chapter explains the amendments to the GST Transition Act.

Special GST credit for sales tax paid on stock

6.2 Under subsection 16(4), you can only claim the special GST credit by identifying it in one (and only one) GST return that you lodge before 22 January 2001. The Commissioner recently granted a concession to enable small business to extend the time of lodgment of the GST return for their second 3 month tax period under section 31-10 of the GST Act. The original intent of subsection 16(4) is that the claim for the special GST credit be made as part of a GST return for a period that ends before 7January 2001. This amendment will align the date of lodgment in subsection 16(4) with the concession granted by the Commissioner. [Amendment 99 (item 7B), subsection 16(4)]

6.3 It is anticipated that many retailers will claim the special credit as soon as possible. However, later events such as discounts and returns may alter the amount the entity is entitled to claim. If, after making the claim, the entity receives any discounts or rebates, or accept any returns or return goods to their supplier so that the entitlement to the special credit is changed, the entity must lodge an amended GST return. The entity must do this on or before the 21st day of the month following the end of the tax period in which the change happens. [Amendment 99 (items 7A and 7C), new subsections 16(3A) and 16(4A)]

Warranties

6.4 The amendment made to section 11 by the ITCAB 2 in relation to warranties is repealed and the same amendment is made to section 12 (progressive or periodic supplies). As section 12 deals with supplies that are made for a period it is more appropriate for the exclusion relating to warranties to be made to that section.

6.5 This amendment makes it clear that warranties that are included in the price of goods or services sold prior to 1 July 2000 are not subject to GST. Where the warranty is the subject of a separate contract and the warranty period spans 1 July 2000, part of the warranty value will be subject to GST in accordance with section 12. [Amendment 96, new subsection 12(1A)]

6.6 New subsection 12(5) provides a definition of 'warranty' for the purposes of section 12. [Amendment 97]

Application of timing rules to acquisitions

6.7 Sections 11, 12 and 14 of the GST Transition Act provide rules about when particular supplies are made. Although these rules refer only to supplies, they also apply to the acquisitions corresponding to those supplies. New subsections 11(4), 12(6) and 14(6) will expressly apply the rules to acquisitions. [Amendments 95, 97 and 98]